It Is Management's Responsibility to Select the Accounting Policies That

question 30

Multiple Choice

It is management's responsibility to select the accounting policies that are used in the preparation of the financial statements. What is the auditor's responsibility with respect to these accounting policies?

• A) approve the accounting policies that are used, so that an opinion can be stated on the fairness of the financial statements
• B) evaluate the appropriateness of the accounting policies that are used and of the associated estimates made
• C) tell management which accounting policies should be selected so that accurate estimates can be made for year-end adjustments
• D) recalculate the estimates that are used for the accounting policies (such as bad debt allowance and warranty expenses)

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Definitions:

Quality Service

The degree of excellence of a service, judged against customer expectations and needs.

Production-oriented Era

A period in business history when the focus was on manufacturing efficiency, without much emphasis on consumer needs or market demand.

Sales-oriented Era

The sales-oriented era refers to a period in marketing history where the primary focus was on selling products through aggressive sales techniques, without much emphasis on customer needs or product quality.

Market-oriented Era

A period in business thought where the primary focus is on understanding and meeting the needs and wants of consumers through market research and product adaptation.